CIA, CISA, Customer complaints, Internal Audits

CIA EXAM PRACTICE QUESTION: SCOPING AN ENGAGEMENT 06/08/2017

I had a chat with a colleague around the recent downgrade of South African sovereign credit rating to sub-investment grading (junk status). It appeared to me that most companies (especially small and medium sized businesses) have been caught by surprise. Internal Auditors play an important role in assisting management in making the best decisions about their brands and products. Here is a classic CIA question that deals with the above.

Ransom’s Question on 06/08/2017 – Scoping a customer product perception enagagement.

As a newly appointed Chief Audit Executive of a manufacturing concern, the Chief Executive Officer has requested that the Internal Audit Department conducts an engagement that will focus on customers’ perception of the quality of the organization’s products and services. Which of the following issues should be addressed first?

Select an answer:

A  –  Supplier Delivery.

B  –  Customer complaints.

C  –  Quality Control.

D  –  Cost effectiveness.

Let us apply the K-E-C approach in answering this question.

Please note that the K-E-C approach is as follows:

K = Keyword, phrase or stem of the question

E = Eliminate two incorrect options

C = Choose the best answer for the remaining two options, linking the answer to the Key or K.

So let us approach this question.

K = Key – The key phrase here is “should be addressed first”. This question is about being able to prioritise and identify the best source of information that will provide an indication of how customers perceive the quality of products and services.

E = Eliminate two options – If we go through the options above, we can easily eliminate answers A and D.

Option A refers to Supplier Deliveries. This in incorrect because the delivery of raw materials or packaging materials may indirectly impact the quality of our product sold but it is not the “FIRST” area that we should be focusing on. This is thus not a good answer.

Option D refers to Cost Effectiveness. Again, this in incorrect because it is not directly related to the question. The information on cost effectiveness only provides us with comfort that we have manufactured goods without wastages. It is not the first area to gauge how customers perceive our goods and services. This is thus not a good answer.

C = Choose the correct answer that lines up with the KEY – We are thus left with options B and C to choose from.

Option C refers to quality control. These are the measures, tools and mechanisms that management has implemented to ensure that finished goods are of good quality. However, if we go back to the KEY in our question which is “first”, we note that this area is a focus area as far as the quality of our products and services are concerned but it is not the first area of concerned. Another key area in this question is the word “customer”. This means the focus of this audit should be about how customers perceive our products and not if quality controls are in place. This option also not the best answer.

Option B refers to customers complaint. This should be your first point of call. Since the review is about how “customers” perceive the quality of products and services, then analysing the customers’ complaints and ensuring that issues raised by customers are monitored and addressed should meet the objectives.

Auditing product quality

The correct answer is thus D –  “Customers Complaints”. It agrees with the Key “should be addressed first”.

 

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@RansomNformi

Ransom is an entrepreneur, aggressive problem-solver who is dedicated to producing results
Ransom has been an Auditor, Finance Manager and Management Accountant for over twelve years – most of those in leadership roles. He is adept at wearing many hats and managing complicated workflows efficiently. Ransom is a qualified and registered Certified Internal Auditor (CIA) and a Certified Informations Systems Auditor (CISA).

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